California law imposes special conditions on employers who choose to compensate employees on a “piece-rate” or per task basis. For example, these employees must receive at least a minimum wage for rest periods and nonproductive time unrelated to the piece-rate task. Recently, in Williams v. J.B. Hunt Transport, Inc., Nos. 24-933, 23-2970 (Aug. 12, 2025), the Ninth Circuit Court of Appeals reviewed a piece-rate compensation plan where the employer paid a minimum wage for all hours worked plus a piece-rate bonus if the employee completed enough eligible activities. The court held that because the employer already paid a minimum wage for all hours worked, no additional compensation is required under California law even though the employer does utilize piece-rate compensation as part of the employee’s overall compensation.
Employer’s Compensation Plan
In 2015, California enacted Labor Code section 226.2, which set forth additional rules for compensating employees on a “piece-rate basis.” Piece-rate compensation generally is a system where an employee earns a set amount each time they complete a task. For example, an automobile mechanic might be paid a set amount for every car they repair.
Additionally, Labor Code section 226.2 requires employers who use piece-rate compensation programs to also ensure that employees are compensated for their rest breaks and any “nonproductive time” the employee works that is unrelated to the task that earns the piece rate. Using the automobile mechanic example, the mechanic may spend time on the clock cleaning their station for the next vehicle — which is not compensated on a piece-rate basis since it is not work related to fixing a vehicle.
In 2018, in response to this new requirement, J.B. Hunt created a new compensation plan for California-based drivers. Under this plan, it would pay the drivers the minimum wage for all hours worked in their shift. It would also pay an “activity-based bonus amount” for eligible activities, such as miles driven, stops made, and loading and unloading their vehicle. This was known as the Driver Pay Plan.
J.B Hunt then calculated each driver’s pay with this formula: Eligible Activity Pay – Hourly Pay = Activity-Based Bonus Amount. If the result was positive, the employee would get that extra amount on top of their hourly wages. If the result was zero or negative, they would only be paid their hourly amount.
Three employees filed a class action lawsuit alleging several wage and hour violations. This compensation plan was the central part of their claim because they viewed it as a “piece-rate basis” plan, and they were not being compensated separately for nonproductive time or rest breaks.
Piece-Rate Safe Harbor
California Labor Code section 226.2(a)(7) provides a “safe harbor” from paying for nonproductive time when the employer pays an hourly rate of at least the applicable minimum wage for all hours worked, in addition to the piece rate. On this basis, J.B. Hunt moved for summary judgment in its favor on the piece-rate claims because its Driver Pay Plan did exactly that. The trial court agreed and dismissed the employees’ piece-rate claims.
The employees appealed this and other trial court decisions to the Ninth Circuit. On appeal, the employees made two arguments. First, they argued that the Driver Pay Plan is just a standard piece-rate compensation plan because whenever a driver’s Eligible Activity Pay is more than their standard hourly wage, the formula only pays the Eligible Activity Pay amount. Also, unlike a standard hourly wage (plus production bonus compensation plan that would satisfy the safe harbor provision of Labor Code section 226.2(a)(7)), the Driver Pay Plan can result in a situation where working more hours doesn’t result in more wages.
To support their argument, the employees used a real example of one driver’s past paychecks. In one pay period, the driver worked 31.78333 hours at $14.25 per hour for a total of $452.92. In that same pay period, the driver also earned $1,033.04 in Eligible Activity Pay. Based on the Driver Pay Plan formula for the Activity-Based Bonus (Eligible Activity Pay – Hourly Wages) the driver earned $580.12 for that bonus. The Driver Pay Plan then takes that amount plus the hourly wages and makes that the compensation for the driver. In this case, it results in $1,033.04 in wages, which is the exact same amount as the total Eligible Activity Pay. J.B. Hunt agreed this is how the pay program works.
Then to prove their point, employees changed the facts to have the driver work 40 hours instead of 31.78 hours. In that case, the driver earns $570 in hourly wages, but with the same amount of Eligible Activity Pay of $1,033.04. Because of the way the formula works, it still results in pay period wages of $1,033.04. So, according to the employees, this pay plan is just a regular piece-rate compensation program in disguise because the compensation is the same regardless of the hours worked, thus making this program ineligible for the safe harbor.
While the Ninth Circuit agrees that the pay plan is “convoluted,” it doesn’t agree that this makes the pay plan ineligible for the safe harbor. The determining factor is that the Driver Pay Plan starts off by paying for all hours actually worked at minimum wage whether the time is productive or nonproductive. It then adds on additional piece-rate compensation should the driver qualify according to the formula. The Ninth Circuit highlights that the safe harbor provision of Labor Code section 226.2 only requires that the employer pay an hourly rate of at least the applicable minimum wage for all hours worked, in addition to any piece-rate compensation. Because the Driver Pay Plan does this, it satisfies the safe harbor provision.
The employees’ second argument is that when the driver doesn’t earn enough Eligible Activity Pay, they are only paid their hourly rate. This creates an unlawful “minimum wage floor” within its piece-rate compensation plan like that found unlawful in a prior California appellate court decision (Gonzalez v. Downtown L.A. Motors, LP, 215 Cal.App.4th 36, 40 (2013)).
In Gonzalez, a car dealership paid its automobile technicians a piece rate for repair work. If the technician’s piece-rate compensation averaged out over their hours worked to be less than the applicable minimum wage, the dealership would supplement their income to bring them up to the minimum wage for all hours worked. The Court of Appeal found this unlawful because the employees were entitled to separate, additional compensation for nonproductive time, thus resulting in the current version of Labor Code section 226.2 codified two years later.
The employees in this case say J.B. Hunt’s Driver Pay Plan is the same exact unlawful compensation scheme because the minimum is there to supplement their work when their piece-rate compensation doesn’t reach the same level of pay. The Ninth Circuit rejected this argument.
The court highlights that the rule in Gonzalez came about because the dealership was taking compensation for the piece-rate work and then spreading it out to other hours owed for nonproductive time. This is not how the Driver Pay Plan works. Instead, the driver receives a minimum wage for all hours worked regardless of the type of work performed and then adds piece-rate compensation should the driver achieve results that make them eligible. The Driver Pay Plan isn’t borrowing compensation from one type of work to cover deficiencies in other types.
As a result, the Ninth Circuit affirmed the trial court’s ruling that J.B. Hunt qualified for Labor Code section 226.2’s safe harbor provision and didn’t owe any additional compensation for nonproductive time.
As this case demonstrates, there are substantial opportunities for compliance errors if part of an employee’s compensation is on a piece-rate basis. Employers who choose to pay employees, at least in part, based on tasks performed should immediately consult with legal counsel to ensure the plan meets all the requirements of California’s Labor Code.
Matthew J. Roberts, Associate General Counsel, Labor and Employment
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